First Horizon Corp (FHN)

How it makes money

Like any commercial bank, First Horizon earns most of its money from the spread between what it pays for deposits and what it charges on loans and securities. In fiscal 2025 net interest income was $2,622 million and noninterest income (fee income from wealth management, deposit service charges, fixed income sales and trading, card and mortgage banking) was $797 million, for consolidated revenue of $3,419 million. Deposits, at $67 billion at year-end, are the largest and cheapest funding source and most of them sit in the Commercial, Consumer & Wealth segment. Note that the company also reports a third, non-operating Corporate segment which absorbs shared-services costs, centralised funding and run-off businesses; it carried negative revenue of $103 million in 2025, which is why the two operating segments together add to slightly more than the consolidated total.

Revenue by segment

A deposit franchise of $68 billion built on 412 southern banking centres does make customers somewhat sticky, and switching a business current account is a nuisance. But nothing here looks durable. The company's own risk factors open by saying it is subject to intense competition for clients from national and state banks, credit unions, brokers, mortgage companies and non-bank entrants, and that the nature of that competition is changing as technology lowers the cost of reaching depositors. It competes in the same southern markets as much larger banks, has no pricing power on either loans or deposits, and its fastest-growing unit — fixed income sales and trading — is a commoditised, cyclical business. Treating First Horizon as a company without a durable competitive advantage is the honest reading.

The company's own risk factors put it plainly: generally, in an economic downturn realised credit losses increase, demand for its products and services declines, and the credit quality of the loan portfolio declines. Loan demand follows business investment and real estate activity in the southern states where the book is concentrated; two of the mortgage-related businesses, origination and lending to mortgage companies, are described as highly sensitive to interest rates and rate cycles; and the fixed income division's revenue depends on market expectations about rates, so it swings with the monetary cycle rather than offsetting it. Deposits themselves can move fairly quickly with monetary policy. Little of this behaves defensively.

Key risks

• Intense and changing competition — The filing states the company is subject to intense competition for clients from national, state and non-US banks, savings institutions, credit unions, consumer finance companies, mutual funds, insurers, securities firms, mortgage banks and hedge funds, some of which face a lighter regulatory burden. It competes on the same ground for talent and for capital in the equity and debt markets.
• Concentration of the loan book — The company discloses that the composition of its loans increases its sensitivity to certain credit risks. About 25% of commercial and industrial loans are to the financial services industry and 11% to real estate and rental and leasing; within commercial real estate, multi-family is 33% and office 20%, two sectors the filing itself describes as having been under stress. On the consumer side, roughly 63% of the consumer real estate portfolio relates to clients in just three states — Florida, Tennessee and Texas — and about 2% of total loans are directly tied to oil and gas.
• Interest rates and the shape of the yield curve — Because a significant part of the business is borrowing, lending and investing in financial instruments, the company is exposed to interest rate risk. It states that a flat or inverted yield curve may reduce its net interest margin and hurt both its lending and its fixed income businesses, and that market expectations about the direction of rates affect the demand for, and value of, its fixed income inventory. It also notes that as rates rise, borrower default risk generally rises with them.
• Deposits, liquidity and funding costs — Liquidity is described as essential to the business model, and its loss or repricing as capable of materially affecting results. Deposit levels can move fairly quickly with monetary policy, and a loss of deposits or a shift in the deposit mix would increase funding costs. Continued access to Federal Home Loan Bank advances and the Federal Reserve discount window depends on policies set by federal agencies and ultimately by Congress, and a downgrade of the company's credit ratings would raise the cost of unsecured funding and could force additional collateral on derivative agreements.
• Approaching the $100 billion regulatory threshold — Bank regulation is tiered by asset size and the company says it is close to reaching $100 billion, the next tier above it. Crossing that line would bring Category IV enhanced prudential standards and put it at risk of a liquidity coverage ratio requirement. The filing notes the compliance costs could be significant and are already being borne as it approaches the threshold, while acknowledging the standards themselves could change.
• Fraud, cybersecurity and third-party dependencies — Fraud is described as a major and increasing operational risk for the company and for all banks. A cybersecurity breach is listed as a major type of operational risk that can cause significant damage and be hard to detect even after it occurs, with attempted breaches happening frequently and treated as an unavoidable part of doing business. The company also outsources certain bank functions to third-party providers whose own disruptions it may have limited control over.
• Technological disruption of the industry — The filing says technological innovation continues to change financial services at a rapid pace, creating new competitive challenges from non-traditional, disruptive providers. Responding requires substantial and continuing investment in information technology, and the company states that to thrive it will need to adopt some of the attitudes of a technology company and shed traditional banking ones, while still meeting supervisory standards. New technologies are themselves subject to risks that could impair their effectiveness.

The filing does not disclose what share of revenue comes from its largest clients, and for a bank serving hundreds of thousands of consumer and business accounts across 450-plus locations that figure would mean little. What it does disclose is concentration inside the loan book, which is where the real exposure sits: about 25% of commercial and industrial loans are to the financial services industry, 13% of that portfolio is loans to mortgage companies, and roughly 63% of the consumer real estate portfolio is in Florida, Tennessee and Texas alone. A downturn in one of those industries or states would hit many borrowers at once.